Taiwan is in the middle of an effort to stabilize its relationship with China, and the process remains controversial. Prior to the presidential election of 2008, Taiwan and China were locked in a downward spiral of mutual fear, where each side feared that the other was about to challenge its fundamental interests. Each took counter-measures that only made the situation worse. The election of Ma Ying-jeou, the leader of the more conservative Nationalist party (KMT) created the possibility of reversing that spiral. Ma campaigned on the idea that Taiwan could better assure its prosperity, dignity and security by engaging and reassuring China rather than provoking it.

Since Ma took office in May 2008, the two sides have made significant progress on the economic side, removing obstacles and facilitating broader cooperation. They will attempt this year to sign a framework agreement for a free trade area. There has been less progress on the political and security side, in part because Beijing and Taipei understand that the necessary mutual trust and consensus on key conceptual issues is lacking. Indeed, China continues to build up its military relevant to Taiwan: hence Taiwan’s request for advanced U.S. arms and our positive response. Broadly speaking, however, the two sides are correct to work from easy issues to hard ones and defer discussion on issues that remain sensitive.

Ma’s project is politically controversial. Although polls indicate that the public supports his cross-Strait policies, the opposition Democratic Progressive Party (DPP) seeks at every turn to convince people that Ma is selling out the island’s interests. Because Ma is a Mainlander, some voters find the sell-out charge plausible.

The DPP’s slowness to recover from a crushing defeat in 2008 has helped Ma for awhile. But his popularity as a result of his administration’s responses to unexpected challenges—for example, disaster relief after a typhoon last August, and the politics of an agreement with the United States on market access for beef. On the latter, the opposition gained traction by playing up food-safety concerns and the legislators of Ma’s own party rebelled at being excluded from policy-making. As a result, Ma’s approval ratings are in the 20s.

The striking phenomenon was some public anxiety about perceived weakness vis-à-vis China. Beijing, the people fear, will identify Taiwan’s points of vulnerability and then exert leverage to exploit them. No one apparently is thinking about how, jujitsu style, to turn Beijing’s pressure against it.

But the situation is far from hopeless for Ma and his party. Despite his low standing in the polls, recent by-elections suggest that his party’s majority electoral support remains firm (as much as 55 percent). He has two years before he must stand for re-election. And, as noted above, the public still supports his China policy. Yet the opposition’s prospects are not bad either. It is regaining some initiative and given the right environment, its candidate could mount a serious challenge. The key factor will be swing voters, who are actually the biggest bloc (40 percent, perhaps). And because Beijing knows that the DPP might return to power, it may be increasingly reluctant to grant concessions to Ma for fear that the DPP will pocket them. That will make it easier for the DPP to make the case that Ma has achieved little for his embrace of Beijing.

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Hong Kong, a “special administrative region” of China, has substantial autonomy to run its internal affairs, while Beijing retains control over defense and foreign affairs. At the same time, China has shaped the political system to prevent the election of the opposition, pro-democracy camp as the majority of the legislative council or the selection of a chief executive not to its liking. For example, half of the seats in the legislature are “functional constituencies” representing key social sectors, most of which are business sectors favorably inclined to Beijing. Similar small franchises select the chief executive.

But China, in its agreement with Britain in 1984 concerning the future of Hong Kong, did promise that universal suffrage would be permitted “ultimately.” Similar general promises were made in the mini-constitution that China’s legislature passed in 1991, with the proviso that the process be “gradual and orderly.” The debate ever since has been over the pace and scope of the movement towards universal suffrage. How soon will it happen? What will happen to functional constituencies? What are the arrangements during the transition period? The pro-democracy groups doubt whether Beijing will ever allow the selection of leaders to reflect the will of the people. Beijing mistrusts the intentions of the democrats if they were ever come to power. It also dislikes the hurly-burly of democracy.

The current argument is over arrangements for the legislative council elections in 2012. The Hong Kong government has proposed minor changes that do not fundamentally change the system, but it points to signals from Beijing that universal suffrage (undefined) will be allowed for elections late in this decade. The government needs the votes of some democrats to pass those arrangements, because they require a two-thirds margin in the legislature. But the democrats are unwilling to support the legislation for 2012 without greater clarity from Beijing that universal suffrage of a truly democratic sort will happen (three years ago, the democrats voted down a similar proposal).

The drama has taken a new and unexpected turn. Recently, five democratic legislators from geographic districts resigned their seats in order to force by-elections, and they assert that this vote is in effect a referendum on universal suffrage. They are from the more radical wing of the democratic camp, and the moderates opposed this gambit. So too, of course, does the Hong Kong government and Beijing, and the latter has apparently instructed the parties that toes its line to not contest the elections.

At the same time, the mode of politics is becoming more extreme and polarized. In particular, some younger activists are engaged in symbolic confrontation for confrontation’s sake. Loosely organized and coordinated through the internet, this is a force that older, elitist politicians and officials find it hard to cope with.

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Chen-Fu and Cecilia Yen Koo Chair in Taiwan Studies

The upshot, of course, is that the chances for resolving the fundamental conflict have declined. Assuming a certain amount of trust-building, reaching a mutually acceptable outcome was not impossible—if the discussion remained within the elite circle. And recent developments may provide some greater leverage to more moderate democrats. Still, radicalization of politics within a society that still values order and symbolic challenges to Beijing probably reduce the odds. Before, there was an assumption that political evolution could be both “gradual and orderly” at the same time. Now that is not so certain.

Economically, Hong Kong must continually find ways to remain competitive while the Chinese economy grows and moves up-scale. The best opportunities are in the service sector, where Hong Kong is already advanced. The top priority is to preserve Hong Kong as an international financial center, and that will require innovations (creation of a bond market, for example). Even if this effort is successful, it is not clear that the results will trickle down to the bulk of the population. Inequality is growing and young people have less and less hope for a middle-class life. That, in turn, can fuel political alienation and radicalization.